How to advise DD

[cupfinalchaos]

Dd 29 been with partner 5 yrs and they rent together. Neither of them are particularly high earners and dd assumed if they got married they would get a mortgage together. Partner’s dad has now decided to help his son buy a house via a trust fund- so the trust would be taking out a mortgage. It transpires his dad is a very wealthy man. I don’t blame him with the divorce rate as it is. They would both be living there and partner would not want dd to pay rent.

Aibu to help her get a small buy to let so she has something in her (or the mortgage lender’s!) name? We can give her a small deposit. I’m not sure what to do for the best.

That’s exactly what I would do in this situation, it means she invests the money she’ll be saving in rent in property and gives her a fall back position in case the relationship breaks down.

But if she has the buy to let in her name and they divorce he can come after that as a marital asset. :( whereas his house is protected. Unless they agree to a pre-nup - which whilst I appreciate isn't legally binding completely, does still carry some weight.

Why a btl? House prices have been falling for years adjusted for inflation and are likely to keep falling for a long time in my opinion. Also, being a landlord is a massive pain in the arse.

I would advise her to stick her rent money and anything you gift her into a stocks and shares ISA.

Does your daughter want to be a landlord? It’s a big commitment and responsibility (or should be!).

Is there not also a risk in the event of divorce that a buy to let (in her name) could be considered a marital asset whilst their home (in the trust’s name, not his) wouldn’t be?

It seems to me that even on a moderate salary, with no accommodation costs she could start building up her own financial independence - I’d encourage her to do this and look into getting her a financial advisor. Or find somewhere to stash the deposit to be released to her to start again, in the hopefully unlikely event they did divorce.

If she's not required to pay rent then she should either buy a property to rent out or be saving that money each month/putting in her pension/investing to have savings in her in name. Being a landlord is not as straightforward as it was before changes to legislation nor as profitable - she'd probably make the same return by saving/ investing with less hassle.
Edited for typos

Thank you.. Dh says if the relationship fails though and she meets someone else, she won’t be able to get another mortgage for a home on top of the buy to let.

Why don’t they consider buying together but in unequal shares? The trust buys his share she pays for her share via mortgage?

I won't do a BTL particularly as it's a lot of hassle and not particularly tax efficient. She can invest in other things though including using the money she "saves" from not paying rent.

Thank you.. will speak to dh about that as dd wont know what she’s doing!

I’m aware of this and we’d have to look at ways to ringfence it.

I think his dad is keen to keep things separate but definitely worth thinking about.

Imo this would be terrible financial advise. Not least because owning a property and being a LL is a massive pain and tie.
I would be encouraging her to save the money she'd usually be paying in rent each month into a stocks and shares isa if she was my daughter.

She won’t want to be a landlord, it’s a right pain in the arse and it costs a lot of money.

BTL is terrible idea. Better to invest the money in a S&S isa.

But this whole thing seems a bit crazy. Why don’t they buy a house together draw up paperwork that the Dad owns part of the house. He could ring fence his money. If they stay together for 20 years he may decide later down the line to gift it to them.

Then your DD will still own part of the house and her and her boyfriend can take out a mortgage together. Then if they do get married it’s not as complicated as nothing needs to change.

This.
Make sure she saves but btl can be more hassle than it’s worth. They might get married but they aren’t at the moment (with no definite plans?) so no worries about her savings not being hers

Thank you. There would be a managing agent though? I don’t know the first thing about stocks and shares. Dh is gifting the kids a small deposit each and was keen they use it for a flat.. but I guess DD’s situation is different.

I don’t understand. Can’t she just save the money she’d be otherwise spending on rent/a mortgage, and do it herself?

They have no definite plans yet but boyfriend has already told dd he would want a prenup.

Do what herself? Manage a buy to let?

I think this sounds like a brilliant plan if you can afford it x

Thank you.. we’d just be giving her the deposit on a tiny flat.

Advise her is get legal advice. If she’s married she can register matrimonial home rights on the property she lives in but doesn’t own to avoid her being thrown immediately on street if they split but also need to look at finances side.

This is a great idea.. till they have children and can’t pay her share.

You need 25% deposit to get a btl, so check if your deposit is enough.

I was planning to get one myself, but after taxes, agency fees, insurance, featuring in some month when the flat is going to be empty the return was ~1%. It is lower than cash ISA.

If she is unsure about investing get her to put money regularly on cash ISA and use the upcoming year to educate herself on finances.

They would have to get married first.